SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                    FORM 10-Q

     [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


     For the Quarter Ended September 30, 2006. Commission File Number 1-9720

                                       OR
     [ ]          TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


             For the Transition Period From __________ to __________
                        Commission File Number __________

                           PAR TECHNOLOGY CORPORATION
             (Exact name of registrant as specified in its charter)

          Delaware                                       16-1434688
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)


PAR Technology Park
8383 Seneca Turnpike
New Hartford, NY                                         13413-4991
(Address of principal executive offices)                 (Zip Code)


       Registrant's telephone number, including area code: (315) 738-0600


     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [  ]

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
(Check one): Large Accelerated Filer [ ]  Accelerated Filer [X]
Non-Accelerated Filer [  ]

     Indicate  by check mark  whether  the  registrant  is a shell  company  (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

     The  number of shares  outstanding  of  registrant's  common  stock,  as of
October 31, 2006 - 14,181,232 shares.

<PAGE>



                           PAR TECHNOLOGY CORPORATION


                                TABLE OF CONTENTS
                                    FORM 10-Q


                                     PART I
                              FINANCIAL INFORMATION


   Item Number
   -----------

      Item 1.    Financial Statements (unaudited)

                 -  Consolidated Statements of Income for
                    the three and nine months ended September 30, 2006 and 2005

                 -  Consolidated Statements of Comprehensive Income for
                    the three and nine months ended September 30, 2006 and 2005

                 -  Consolidated Balance Sheets at
                    September 30, 2006 and December 31, 2005

                 -  Consolidated Statements of Cash Flows
                    for the nine months ended September 30, 2006 and 2005

                 -  Notes to Unaudited Interim Consolidated Financial Statements

      Item 2.       Management's Discussion and Analysis of
                    Financial Condition and Results of Operations

      Item 3.       Quantitative and Qualitative Disclosures About Market Risk

      Item 4.       Controls and Procedures

                                     PART II
                                OTHER INFORMATION


      Item 1A.      Risk Factors

      Item 4.       Submission of Matters to a Vote of Security Holders

      Item 6.       Exhibits and Reports on Form 8-K

      Signatures

      Exhibit Index


<PAGE>
                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                   PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                    (in thousands, except per share amounts)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                       For the three months      For the nine months
                                                       ended September 30,        ended September 30,
                                                      ----------------------    ----------------------
                                                         2006         2005         2006         2005
                                                      ---------    ---------    ---------    ---------
<S>                                                   <C>          <C>          <C>          <C>
Net revenues:
     Product ......................................   $  17,975    $  22,855    $  63,705    $  66,786
     Service ......................................      15,092       15,065       43,723       42,883
     Contract .....................................      15,467       14,277       47,046       42,505
                                                      ---------    ---------    ---------    ---------
                                                         48,534       52,197      154,474      152,174
                                                      ---------    ---------    ---------    ---------
Costs of sales:
     Product ......................................      10,370       13,239       36,242       40,008
     Service ......................................      11,387       11,517       32,937       32,887
     Contract .....................................      14,600       13,284       43,844       39,793
                                                      ---------    ---------    ---------    ---------
                                                         36,357       38,040      113,023      112,688
                                                      ---------    ---------    ---------    ---------
          Gross margin ...........................      12,177       14,157       41,451       39,486
                                                      ---------    ---------    ---------    ---------
Operating expenses:
     Selling, general and administrative ..........       8,241        7,457       24,510       22,173
     Research and development .....................       2,613        2,483        8,348        6,868
     Amortization of identifiable intangible assets         307          246          922          736
                                                      ---------    ---------    ---------    ---------
                                                         11,161       10,186       33,780       29,777
                                                      ---------    ---------    ---------    ---------

Operating income ..................................       1,016        3,971        7,671        9,709
Other income, net .................................          62          191          437          495
Interest expense ..................................        (206)         (41)        (458)        (184)
                                                      ---------    ---------    ---------    ---------
Income before provision for income taxes ..........         872        4,121        7,650       10,020
Provision for income taxes ........................        (322)      (1,578)      (2,750)      (3,820)
                                                      ---------    ---------    ---------    ---------
Net income ........................................   $     550    $   2,543    $   4,900    $   6,200
                                                      =========    =========    =========    =========
Earnings per share
     Basic ........................................   $     .04    $     .18    $     .35    $     .45
     Diluted ......................................   $     .04    $     .17    $     .33    $     .42

Weighted average shares outstanding
     Basic ........................................      14,181       13,978       14,168       13,696
                                                      =========    =========    =========    =========
     Diluted ......................................      14,646       14,751       14,751       14,604
                                                      =========    =========    =========    =========
</TABLE>

See notes to unaudited interim consolidated financial statements


<PAGE>




                   PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                       For the three months      For the nine months
                                                       ended September 30,        ended September 30,
                                                      ----------------------    ----------------------
                                                         2006         2005         2006         2005
                                                      ---------    ---------    ---------    ---------
<S>                                                   <C>          <C>          <C>          <C>
Net income                                            $     550    $   2,543    $   4,900    $   6,200
Other comprehensive income (loss), net of tax:
     Foreign currency translation adjustments                62          (41)         183         (406)
                                                      ---------    ---------    ---------    ---------
Comprehensive income                                  $     612    $   2,502    $   5,083    $   5,794
                                                      =========    =========    =========    =========
</TABLE>







See notes to unaudited interim consolidated financial statements


<PAGE>


                   PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except share amounts)
                                   (unaudited)
                                                     September 30, December 31,
                                                         2006          2005
Assets                                                ---------    ----------
Current assets:
       Cash and cash equivalents ..................   $   2,098    $   4,982
       Accounts receivable-net ....................      47,900       40,781
       Inventories-net ............................      34,839       29,562
       Income tax refunds .........................       2,353          879
       Deferred income taxes ......................       4,442        5,690
       Other current assets .......................       3,192        2,598
                                                      ---------    ---------
               Total current assets ...............      94,824       84,492
Property, plant and equipment - net ...............       7,550        8,044
Goodwill ..........................................      20,885       20,622
Intangible assets - net ...........................       8,902        9,904
Other assets ......................................       2,695        2,087
                                                      ---------    ---------
                                                      $ 134,856    $ 125,149
                                                      =========    =========

Liabilities and Shareholders' Equity
Current liabilities:
       Current portion of long-term debt ..........   $     129    $      76
       Borrowings under lines of credit ...........       9,899        3,500
       Accounts payable ...........................      12,913       12,703
       Accrued salaries and benefits ..............       7,362        9,725
       Accrued expenses ...........................       2,003        2,352
       Customer deposits ..........................       3,545        3,973
       Deferred service revenue ...................      10,616       11,332
                                                      ---------    ---------
              Total current liabilities ...........      46,467       43,661
                                                      ---------    ---------
Long-term debt ....................................       1,889        1,948
                                                      ---------    ---------
Deferred income taxes .............................         751          201
                                                      ---------    ---------
Other long-term liabilities .......................       1,649          847
                                                      ---------    ---------
Shareholders' Equity:
       Preferred stock, $.02 par value,
           1,000,000 shares authorized ............        --           --
       Common stock, $.02 par value,
           29,000,000 shares authorized;
           15,959,536 and 15,914,958 shares issued;
           14,181,232 and 14,136,654 outstanding ..         319          318
       Capital in excess of par value .............      37,799       37,271
       Retained earnings ..........................      52,338       47,442
       Accumulated other comprehensive loss .......        (428)        (611)
       Treasury stock, at cost, 1,778,304 shares ..      (5,928)      (5,928)
                                                      ---------    ---------
              Total shareholders' equity ..........      84,100       78,492
                                                      ---------    ---------
                                                      $ 134,856    $ 125,149
                                                      =========    =========




See notes to unaudited interim consolidated financial statements
<PAGE>

                   PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>

                                                                      For the nine months
                                                                       ended September 30,
                                                                     ---------------------
                                                                        2006        2005
                                                                     --------    ---------
<S>                                                                  <C>         <C>
Cash flows from operating activities:
    Net income ...................................................   $  4,900    $  6,200
    Adjustments to reconcile net income to net cash
 provided by (used in) operating activities:
         Depreciation and amortization ...........................      2,858       2,780
         Provision for bad debts .................................        363         880
         Provision for obsolete inventory ........................      1,193       3,054
         Equity based compensation ...............................        200         --
         Tax benefit of stock option exercises ...................        --        2,853
         Deferred income tax .....................................      1,675        (272)
         Changes in operating assets and liabilities:
             Accounts receivable .................................     (7,482)     (4,999)
             Inventories .........................................     (6,470)     (5,638)
             Income tax refunds ..................................     (1,474)        --
             Other current assets ................................       (594)        110
             Other assets ........................................       (608)       (578)
             Accounts payable ....................................        210       2,934
             Accrued salaries and benefits .......................     (2,363)        210
             Accrued expenses ....................................       (349)       (939)
             Customer deposits ...................................       (428)       (589)
             Deferred service revenue ............................       (716)        728
             Other long-term liabilities .........................        802         636
                                                                     --------    --------
               Net cash provided by (used in) operating activities     (8,283)      7,370
                                                                     --------    --------
Cash flows from investing activities:
    Capital expenditures .........................................       (962)     (1,444)
    Capitalization of software costs .............................       (399)       (528)
                                                                     --------    --------
               Net cash used in investing activities .............     (1,361)     (1,972)
                                                                     --------    --------
 Cash flows from financing activities:
    Net borrowings (payments) under lines-of-credit agreements ...      6,399     (10,246)
    Payments of long-term debt ...................................         (6)        (51)
    Proceeds from the exercise of stock options ..................        160       1,503
    Excess tax benefit of stock option exercises .................        169         --
    Cash dividend in lieu of fractional shares on stock split ....         (4)        --
                                                                     --------    --------
               Net cash provided by (used in) financing activities      6,718      (8,794)
                                                                     --------    --------
Effect of exchange rate changes on cash and cash equivalents .....         42        (406)
                                                                     --------    --------
Net decrease in cash and cash equivalents ........................     (2,884)     (3,802)
Cash and cash equivalents at beginning of period .................      4,982       8,696
                                                                     --------    --------
Cash and cash equivalents at end of period .......................   $  2,098    $  4,894
                                                                     ========    ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
    Interest .....................................................   $    426    $    219
    Income taxes, net of refunds .................................      2,316       1,293

</TABLE>

See notes to unaudited interim consolidated financial statements


<PAGE>


                   PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
          NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


1.   The accompanying  unaudited interim consolidated  financial statements have
     been prepared by PAR  Technology  Corporation  (the  "Company" or "PAR") in
     accordance with U.S. generally accepted  accounting  principles for interim
     financial  statements and with the instructions to Form 10-Q and Regulation
     S-X pertaining to interim financial statements.  Accordingly, these interim
     financial  statements do not include all information and footnotes required
     by U.S.  generally  accepted  accounting  principles for complete financial
     statements. In the opinion of the Company such unaudited statements include
     all adjustments (which comprise only normal recurring  accruals)  necessary
     for a fair  presentation  of the results for such  periods.  The results of
     operations  for the three and nine months ended  September 30, 2006 are not
     necessarily  indicative of the results of operations to be expected for any
     future  period.  The  consolidated  financial  statements and notes thereto
     should  be read in  conjunction  with the  audited  consolidated  financial
     statements  and notes for the year ended  December 31, 2005 included in the
     Company's  December 31, 2005 Annual Report to the  Securities  and Exchange
     Commission on Form 10-K.

     The preparation of consolidated financial statements requires management of
     the Company to make a number of estimates and  assumptions  relating to the
     reported  amount of assets and liabilities and the disclosure of contingent
     assets and liabilities at the date of the consolidated financial statements
     and the  reported  amounts of  revenues  and  expenses  during the  period.
     Significant  items subject to such estimates and assumptions  include:  the
     carrying amount of property,  plant and equipment,  identifiable intangible
     assets and goodwill, valuation allowances for receivables,  inventories and
     deferred  income  tax  assets.  Actual  results  could  differ  from  those
     estimates.

2.   On November 2, 2006, the Company acquired  substantially  all of the assets
     of SIVA(R)Corporation. The purchase price was $6.7 million and consisted of
     $1.1  million  worth of Company  stock  (125,549  shares of PAR  Technology
     Corporation common stock issued out of treasury) and the remainder in cash.
     The purchase price is also subject to price contingencies based upon future
     performance and other conditions.

     Based in Delray  Beach,  Florida,  SIVA is the  creator  of  point-of-sale,
     kitchen,  back office and  operations  intelligence  software  that use web
     based next generation  technologies to improve  operational  efficiency and
     reduce  the  cost  of  technology   ownership  for  multi-unit   restaurant
     operations.

3.   On October 4, 2005, the Company and its wholly-owned  Canadian  subsidiary,
     PixelPoint, ULC (the "Canadian Subsidiary"), completed their acquisition of
     PixelPoint Technologies, Inc. ("PixelPoint") pursuant to which the Canadian
     Subsidiary acquired all of the stock of PixelPoint.  The purchase price was
     $7.5 million and consisted of $542,000 in Company  stock (27,210  shares of
     PAR  Technology   Corporation  common  stock  issued  out  of  treasury)  a
     promissory  note for $671,000 and the  remainder in cash.  The Company also
     incurred  $344,000 in direct  acquisition  costs relating to this purchase.
     The purchase price is also subject to price contingencies based upon future
     revenue performance against certain established targets.  Based in suburban
     Toronto,  Ontario,  PixelPoint Technologies,  Inc. is a premier supplier to
     the  hospitality  industry with over 5,000  installations  in  full-service
     restaurants around the globe.

     On December 6, 2005, the Company also acquired C(3)I Associates  ("C(3)I"),
     a Government  technology  services  business.  The Company paid $589,000 in
     cash and assumed  certain  liabilities.  On an  unaudited  proforma  basis,
<PAGE>

     assuming the completed acquisitions had occurred as of the beginning of the
     period presented,  the consolidated  results of the Company would have been
     as follows (in thousands, except per share amounts):

                                For the three months      For the nine months
                              ended September 30, 2005  ended September 30, 2005
                              ------------------------  ------------------------

Net revenues .................         $   53,761          $   157,029
Net income ...................         $    2,620          $     6,519

Earnings per share:
   Basic .....................         $      .19          $       .48
   Diluted ...................         $      .18          $       .45


     The unaudited proforma financial  information  presented above gives effect
     to purchase  accounting  adjustments which have resulted or are expected to
     result from the acquisition.  This proforma  information is not necessarily
     indicative  of the results that would  actually  have been obtained had the
     companies been combined for the period presented.

4.   Inventories   are  primarily  used  in  the   manufacture  and  service  of
     Hospitality products. The components of inventory, net of related reserves,
     consist of the following:

                                              (in thousands)
                                     September 30,        December 31,
                                         2006                2005
                                      ---------           ---------

Finished goods ...............         $ 9,874             $ 7,217
Work in process ..............           1,680               1,874
Component parts ..............           6,090               4,693
Service parts ................          17,195              15,778
                                       -------             -------
                                       $34,839             $29,562
                                       =======             =======

     At  September  30, 2006 and  December  31,  2005,  the Company had recorded
     reserves for  shrinkage,  excess and obsolete  inventory of $3,985,000  and
     $4,189,000, respectively.

5.   Effective  January 1, 2006, the Company adopted the fair value  recognition
     provisions  of  Statement  of  Financial   Accounting  Standards  No.  123R
     Share-Based  Payment  (SFAS  123R) on a modified  prospective  basis.  This
     standard  requires  the Company to measure  the cost of  employee  services
     received in exchange  for equity  awards based on the grant date fair value
     of the awards.  The cost is  recognized  as  compensation  expense over the
     vesting  period of the  awards.  Total  compensation  expense  included  in
     operating  expenses for the three and nine months ended  September 30, 2006
     was $62,000 and $200,000,  respectively.  As of September  30, 2006,  there
     were  1,007,729  stock  options  outstanding.  At September  30, 2006,  the
     unrecognized  compensation  expense related to non vested option awards was
     $309,967 (net of estimated forfeitures).

     Prior to adopting SFAS 123R on January 1, 2006, the Company's  equity based
     employee  compensation  awards were accounted for under the recognition and
     measurement  principles of APB Opinion No. 25,  Accounting for Stock Issued
     to Employees,  and related  interpretations.  For the three and nine months
     ended September 30, 2005, no equity option based employee compensation

<PAGE>

     cost is reflected in net income, as all options granted under the Company's
     stock option  plans had an exercise  price equal to the  underlying  common
     stock  price on the date of grant.  The  following  table  illustrates  the
     effect on net income and  earnings  per share as if the Company had applied
     the fair value recognition provisions to equity based employee compensation
     (in thousands, except per share data):


                                      For the three months   For the nine months
                                       ended September 30,   ended September 30,
                                              2005                  2005
                                      -------------------    -------------------

        Net income                         $   2,543              $   6,200
        Compensation expense, net of tax        (117)                  (296)
                                           ---------              ---------
        Proforma net income                $   2,426              $   5,904
                                           =========              =========

     Earnings per share:
        As reported    --    Basic         $     .18              $     .45
                       --    Diluted       $     .17              $     .42

        Proforma       --    Basic         $     .17              $     .43
                       --    Diluted       $     .16              $     .40


     In 2005,  the  Company's  1995 Stock Option plan  expired.  The 2005 Equity
     Incentive  Plan was  approved by the  shareholders  at the  Company's  2006
     Annual Meeting.  The Company has reserved  1,000,000  shares under its 2005
     Equity Incentive Plan. Stock options under this Plan may be incentive stock
     options  or  nonqualified  stock  options.   The  Plan  also  provides  for
     restricted  stock  grants.  To date,  there have been no  restricted  stock
     grants under this Plan. Stock options are  nontransferable  other than upon
     death.  Option grants  generally  vest over a one to five year period after
     the grant and typically expire ten years after the date of the grant.

     Information with respect to this plan is as follows:


                                                                     Aggregate
                                  No. of Shares Weighted Average Intrinsic Value
                                  (in thousands) Exercise Price   (in thousands)
                                  ------------- ----------------  --------------

Outstanding at December 31, 2005       1,037       $    4.03            $ 15,008
    Granted .....................         15           14.71               (104)
    Exercised ...................        (44)           3.58                660
    Forfeited ...................         --             --
                                    --------


Outstanding at September 30, 2006      1,008       $    4.21            $  4,898
                                    ========       =========            ========


Vested and expected to vest
  at September 30, 2006 .........        999       $    4.17            $  4,897
                                    ========       =========            ========

Total shares exercisable
  as of September 30, 2006 ......        729       $    3.21            $  4,275
                                    ========       =========            ========


<PAGE>

     During the nine months ended  September  30, 2006 and 2005,  the  per-share
     weighted  average  fair value of the stock  options  granted  was $1.75 and
     $4.78, respectively. The fair value of options at the date of the grant was
     estimated using the Black-Scholes model with the following  assumptions for
     the respective period ending September 30:

                                                            2006          2005
                                                         --------      ---------

      Expected option life ...........................   2.3 years     4.9 years
      Weighted average risk-free interest rate .......     4.8%          3.5%
      Weighted average expected volatility............      62%           43%


     For the nine month periods ended  September 30, 2006 and 2005, the expected
     option life was based on the Company's  historical  experience with similar
     type  options.  Expected  volatility  for  the  nine  month  periods  ended
     September 30, 2006 and 2005, is based on  historical  volatility  levels of
     the  Company's  common stock over the preceding  period of time  consistent
     with the expected  life.  The  risk-free  interest  rate for the nine month
     period  ended  September  30, 2006 and 2005 is based on the  implied  yield
     currently  available on U.S.  Treasury  zero coupon issues with a remaining
     term equal to the expected life.

     Stock options outstanding at September 30, 2006 are summarized as follows:

                               Number
          Range of           Outstanding      Weighted Average  Weighted Average
       Exercise Prices     (in thousands)      Remaining Life     Exercise Price
       ---------------        --------         -------------    ----------------

       $1.25 -  $4.00             626           4.2    Years        $   2.32
       $4.01 -  $7.25             296           7.8    Years        $   5.94
       $7.26 - $15.85              86           8.8    Years        $  11.99
       --------------          ------           ------------        --------
       $1.25 - $15.85           1,008           5.7    Years        $   4.21
       ==============          ======           ============        ========

6.   Earnings per share are calculated in accordance with Statement of Financial
     Accounting  Standards  No. 128,  Earnings per Share,  which  specifies  the
     computation,  presentation  and  disclosure  requirements  for earnings per
     share (EPS).  It requires the  presentation of basic and diluted EPS. Basic
     EPS excludes all dilution and is based upon the weighted  average number of
     common  shares  outstanding  during the period.  Diluted EPS  reflects  the
     potential  dilution that would occur if  securities  or other  contracts to
     issue common stock were exercised or converted into common stock.

     The weighted average number of common shares utilized in the calculation of
     the  diluted  earnings  per share  does not  include  anti-dilutive  shares
     aggregating 77,888 and 59,255 for the three and nine months ended September
     30, 2006,  respectively.  There were no  anti-dilutive  shares for the same
     periods in 2005.

<PAGE>

     The  following  is  a   reconciliation   of  the  weighted  average  shares
     outstanding  for the basic and  diluted  EPS  computations  (in  thousands,
     except per share data):

                                                       For the three months
                                                        ended September 30,
                                                       -------------------
                                                          2006       2005
                                                        -------   -------

Net income ..........................................   $   550   $ 2,543
                                                        =======   =======
Basic:
     Shares outstanding at beginning of period ......    14,181    13,929
     Weighted average shares issued during the period      --          49
                                                        -------   -------
     Weighted average common shares, basic ..........    14,181    13,978
                                                        =======   =======
     Earnings per common share, basic ...............   $   .04   $   .18
                                                        =======   =======
Diluted:
     Weighted average common shares, basic ..........    14,181    13,978
     Dilutive impact of stock options ...............       465       773
                                                        -------   -------
     Weighted average common shares, diluted ........    14,646    14,751
                                                        =======   =======
     Earnings per common share, diluted .............   $   .04   $   .17
                                                        =======   =======



                                                       For the nine months
                                                        ended September 30,
                                                       -------------------
                                                          2006       2005
                                                        -------   -------

Net income ..........................................   $ 4,900   $ 6,200
                                                        =======   =======
Basic:
     Shares outstanding at beginning of period ......    14,137    13,402
     Weighted average shares issued during the period        31       294
                                                        -------   -------
     Weighted average common shares, basic ..........    14,168    13,696
                                                        =======   =======
     Earnings per common share, basic ...............   $   .35   $   .45
                                                        =======   =======
Diluted:
     Weighted average common shares, basic ..........    14,168    13,696
     Dilutive impact of stock options ...............       583       908
                                                        -------   -------
     Weighted average common shares, diluted ........    14,751    14,604
                                                        =======   =======
     Earnings per common share, diluted .............   $   .33   $   .42
                                                        =======   =======


7.   On November 14, 2005, the Company's  Board of Directors  declared a 3 for 2
     stock split in the form of a stock dividend that was distributed on January
     6, 2006 to  shareholders  of record on December 12, 2005. All share and per
     share data in these consolidated interim unaudited financial statements and
     footnotes  have  been  retroactively  restated  as if the  stock  split had
     occurred as of the earliest period presented.

8.   The Company's  reportable  segments are strategic  business units that have
     separate management teams and infrastructures that offer different products
     and services.

     The Company has two reportable  segments,  Hospitality and Government.  The
     Hospitality   segment  offers  integrated   solutions  to  the  hospitality
     industry.  These offerings  include  industry leading hardware and software
     applications utilized in point-of-sale,  back of store and corporate office

<PAGE>

     applications as well as in the hotel/resort/spa  marketplace.  This segment
     also  offers  customer  support  including  field  service,   installation,
     twenty-four hour telephone support and depot repair. The Government segment
     develops advanced technology prototype systems primarily for the Department
     of Defense  and other  Governmental  agencies.  It  provides  services  for
     operating and maintaining certain U.S.  Government-owned  communication and
     test  sites,  and  for  planning,   executing  and  evaluating  experiments
     involving new or advanced radar systems.  It is also involved in developing
     technology to track mobile  chassis.  Intersegment  sales and transfers are
     not significant.

     Information as to the Company's segments is set forth below:

                                                (in thousands)
                                 For the three months     For the nine months
                                 ended September 30,       ended September 30,
                               ----------------------    ----------------------
                                  2006        2005          2006         2005
                               ---------   ----------    ---------   ----------
Net revenues:
     Hospitality ............. $  33,067    $  37,920    $ 107,428    $ 109,669
     Government ..............    15,467       14,277       47,046       42,505
                               ---------    ---------    ---------    ---------
           Total ............. $  48,534    $  52,197    $ 154,474    $ 152,174
                               =========    =========    =========    =========
Operating income:
     Hospitality ............. $     213    $   3,063    $   4,647    $   7,148
     Government ..............       803          908        3,024        2,561
                               ---------    ---------    ---------    ---------
                                   1,016        3,971        7,671        9,709
Other income, net ............        62          191          437          495
Interest expense .............      (206)         (41)        (458)        (184)
                               ---------    ---------    ---------    ---------
Income before provision
  for income taxes ........... $     872    $   4,121    $   7,650    $  10,020
                               =========    =========    =========    =========

Depreciation and amortization:
     Hospitality ............. $     835    $     824    $   2,531    $   2,426
     Government ..............        10           23           35           66
     Other ...................        99           99          292          288
                               ---------    ---------    ---------    ---------
           Total ............. $     944    $     946    $   2,858    $   2,780
                               =========    =========    =========    =========
Capital expenditures:
     Hospitality ............. $      70    $     468    $     766    $   1,189
     Government ..............        10           11           10           41
     Other ...................        15           94          186          214
                               ---------    ---------    ---------    ---------
           Total ............. $      95    $     573    $     962    $   1,444
                               =========    =========    =========    =========

Revenues by geographic area:
     United States ........... $  41,523    $  47,414    $ 134,694    $ 137,383
     Other Countries .........     7,011        4,783       19,780       14,791
                               ---------    ---------    ---------    ---------
           Total ............. $  48,534    $  52,197    $ 154,474    $ 152,174
                               =========    =========    =========    =========

<PAGE>
     The following table represents identifiable assets by business segment:

                                               (in thousands)
                                     September 30,        December 31,
                                         2006                 2005
                                      ---------           ----------
Identifiable assets:
    Hospitality ..............         $119,575            $106,529
    Government ...............            9,774               9,015
    Other ....................            5,507               9,605
                                       --------            --------
Total ........................         $134,856            $125,149
                                       ========            ========


     The following table presents  identifiable  assets by geographic area based
on the location of the asset:

                                                (in thousands)
                                        September 30,     December 31,
                                            2006              2005
                                         --------          --------

United States ................           $127,388          $119,627
Other Countries ..............              7,468             5,522
                                         --------          --------
       Total .................           $134,856          $125,149
                                         ========          ========


     The following table represents Goodwill by business segment:

                                                (in thousands)
                                        September 30,     December 31,
                                            2006              2005
                                         --------          --------

    Hospitality ..............           $ 20,349          $ 20,086
    Government ...............                536               536
                                         --------          --------
Total ........................           $ 20,885          $ 20,622
                                         ========          ========


     Customers  comprising  10% or  more of the  Company's  total  revenues  are
summarized as follows:

                                    For the three months   For the nine months
                                     ended September 30,   ended September 30,
                                      -----     ------    -------    -------
                                       2006      2005       2006       2005
                                      -----     ------    -------    -------
Restaurant Segment:
     McDonald's Corporation .......     26%       25%       26%       27%
     YUM! Brands, Inc. ............     15%       14%       12%       13%
Government Segment:
     Department of Defense ........     32%       27%       30%       28%
All Others ........................     27%       34%       32%       32%
                                       ---       ---       ---       ---
                                       100%      100%      100%      100%
                                       ===       ===       ===       ===


<PAGE>


Item 2: Management's  Discussion and Analysis of Financial Condition and Results
of Operations

"Safe Harbor"  Statement under the Private  Securities  Litigation Reform Act of
1995

     This document contains  "forward-looking  statements" within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities  Exchange Act of 1934.  Any  statements  in this document that do not
describe  historical  facts  are  forward-looking  statements.   Forward-looking
statements in this document (including  forward-looking statements regarding the
continued  health of the Hospitality  industry,  future  information  technology
outsourcing  opportunities,   an  expected  increase  in  funding  by  the  U.S.
Government relating to the Company's logistics management contracts,  the impact
of current world events on our results of  operations,  the effects of inflation
on  our  margins,  and  the  effects  of  interest  rate  and  foreign  currency
fluctuations  on our results of operations) are made pursuant to the safe harbor
provisions of the Private Securities  Litigation Reform Act of 1995. When we use
words such as "intend," "anticipate,"  "believe," "estimate," "plan," "will," or
"expect",  we  are  making  forward-looking  statements.  We  believe  that  the
assumptions and expectations  reflected in such  forward-looking  statements are
reasonable,  based on  information  available to us on the date  hereof,  but we
cannot assure you that these  assumptions  and  expectations  will prove to have
been correct or that we will take any action that we presently  may be planning.
We have disclosed  certain  important factors that could cause our actual future
results to differ materially from our current expectations,  including a decline
in the volume of purchases made by one or a group of our major customers;  risks
in technology development and commercialization;  risks of downturns in economic
conditions generally,  and in the quick-service sector of the hospitality market
specifically;  risks associated with government contracts; risks associated with
competition  and  competitive  pricing  pressures;  and risks related to foreign
operations.  Forward-looking  statements made in connection with this report are
necessarily  qualified by these  factors.  We are not  undertaking  to update or
revise  publicly any  forward-looking  statement if we obtain new information or
upon the occurrence of future events or otherwise.

Overview

     PAR was founded in 1968,  and PAR's  revenues  since 1980 have been derived
predominantly from the sale of hospitality  management systems to a large number
of customers in  restaurants  including  hardware,  software,  professional  and
traditional  lifecycle  support  services.  The balance of  revenues  are driven
through contracts from the federal  government  involving applied technology and
I/T outsourcing of military and non-military federal communication facilities.

Our Businesses

     The target market for our products and services is several areas within the
hospitality industry,  including restaurants,  hotels, resorts and spas. PAR has
been an approved  vendor to McDonald's  since 1980,  Yum!  Brands since 1983 and
several other leading  concepts over the past 2 1/2 decades.  PAR's install base

<PAGE>

is  comprised  of  40,000  plus  restaurants  around  the globe in more than 100
countries,  primarily  in the  quick-serve  segment.  The  Company's  management
technology software enables the efficient  operations of hospitality  businesses
by  managing  key data  throughout  the  enterprise  and can  improve  operating
efficiencies,   labor   management   and  inventory   planning.   The  Company's
professional  services  capability  can then assist  customers in achieving  the
critical  business  functionality  and  operating  return  of  their  individual
technology investment.

     In  maintaining  long term  relationships  with our  customers and industry
leaders,  PAR has  continued  to lead the  industry  as  technology  provider to
restaurants and the Company's niche in quick-serve  stores.  McDonald's has over
32,000  restaurants  in 121  countries  and PAR is  currently  one of  only  two
approved  vendors to market  their  point-of-sale  systems to all of  McDonald's
stores.  Yum!Brands,  Inc.  (which includes Taco Bell, KFC, Pizza Hut, Long John
Silvers and A&W  Restaurants)  has over 33,000  stores  worldwide and PAR is the
sole approved  management  technology  vendor to their Taco Bell  restaurants as
well as the point-of-sale  (POS) technology vendor of choice to KFC. Other major
hospitality  concepts where PAR is the selected technology vendor of choice are:
Boston Market, Chick-fil-A,  CKE Restaurants (including Hardees and Carl's Jr.),
Carnival  Cruise  Lines,  Loews  Cineplex and large  franchisees  of each of the
previously mentioned brands.

     In the fourth  quarter  of 2005 PAR  acquired  PixelPoint(R)  Technologies,
Inc., a privately held hospitality technology company.  PixelPoint is a provider
of restaurant  management  software  applications for full/table service dining.
PixelPoint's  product portfolio contains  applications in multiple languages and
markets this software globally.  At the time of acquisition  PixelPoint had over
5,000 installations of their software.

     In the fourth quarter 2004 the Company acquired  Springer-Miller Systems, a
leader in hospitality  management solutions for city-center hotels,  destination
resorts and spas, golf,  timeshare  destinations,  and casino resorts across the
globe.  Springer-Miller's  Hospitality  Management system sets itself apart from
the  competition  through  its  integrated  design and unique  approach to guest
service.  Springer-Miller's  product offerings include more than 20 modules that
are seamlessly  integrated to the Host  application.  These modules  provide the
property  managers and their  employees with the tools  necessary to personalize
service,  surpass even the highest  guest  expectations  and  increase  property
revenues.  PAR has maintained a very distinctive  customer list including Pebble
Beach  Resorts,  The Four  Seasons,  the Hard Rock Hotel & Casino,  The Mandarin
Oriental Hotel Group, and Destination Hotels & Resorts to name a select few.

     Approximately 30% of the Company's revenues are generated in our Government
Business segment. This segment is comprised of two subsidiaries:  PAR Government
Systems Corporation and Rome Research Corporation.  Through these two government
contractors, the Company provides I/T and communications support services to the

<PAGE>

three principal  armed services of the United States:  Navy, Air Force and Army.
In addition,  PAR also offers its services to several non-military U.S. federal,
state and local agencies.  The Company provides applied  technology  services to
their  customers.  These  services  include  experimental  studies  to  advanced
operational systems that span a broad range of research areas,  including radar,
image  and  signal  processing,  logistics  management  systems  and  geospatial
services and products.  The Company's high Government  performance rating allows
the Company to continually  secure repeat  business and long-term  client-vendor
relationships with their contract customers. This exceptional performance rating
also allows the Company to  successfully  compete for new clients and  contracts
across the globe.  PAR can  provide  its  clients  the  expertise  necessary  to
facilitate and operate the most complex  technological  systems and environments
that government  agencies  utilize,  while  maintaining the highest standards of
performance.

Summary

     During  the first  nine  months of 2006,  the  overall  hospitality  market
continued  the  positive  trend  set the  previous  years  as  evidenced  by the
continued  strong results  reported for the Company's  major  customers,  and in
particular,  the quick-service  restaurant market, including McDonald's and Yum!
Brands. In 2005, PAR acquired  PixelPoint  Technologies and provided the company
with the necessary software to penetrate the table-service  market. In 2004, PAR
acquired the assets of Springer-Miller  Systems which enhanced significantly the
Company's  software  product  offerings  in the  global  hospitality  technology
market.

     PAR's Government  segment continues to add business in 2006 associated with
technical  outsourcing for the U.S. Military.  PAR provides outsourcing services
for the three  main  branches  of the U.S.  military,  as well as other  Federal
Government  Agencies including the International  Broadcasting  Bureau (IBB) and
the General Services Administration (GSA).

     The  following  table sets forth the  Company's  net revenues by reportable
segment (in thousands):

                             For the three months   For the nine months
                              ended September 30,   ended September 30,
                              -------   --------   --------   --------
                                2006       2005       2006       2005
                             --------   --------   --------   --------
Net revenues:
     Hospitality .........   $ 33,067   $ 37,920   $107,428   $109,669
     Government ..........     15,467     14,277     47,046     42,505
                             --------   --------   --------   --------
Total consolidated revenue   $ 48,534   $ 52,197   $154,474   $152,174
                             ========   ========   ========   ========

     The following discussion and analysis highlights items having a significant
effect on operations  during the three and nine months ended September 30, 2006.
Current  performance  and results of operation  may not be  indicative of future
operations or earnings. It should be read in conjunction with the audited annual
consolidated  financial  statements  and notes  thereto and other  financial and
statistical  information included in this report.
<PAGE>

Results of Operations -- Three Months Ended September 30, 2006 Compared to Three
Months Ended September 30, 2005

     The  Company  reported  revenues of $48.5  million  for the  quarter  ended
September  30,  2006, a decrease of 7% from the $52.2  million  reported for the
quarter ended September 30, 2005. The Company's net income for the quarter ended
September 30, 2006 was $550,000,  or $.04 diluted net income per share, compared
to net income of $2.5 million and $.17 per diluted  share for the same period in
2005.

     Product revenues from the Company's  Hospitality segment were $18.0 million
for the  quarter  ended  September  30,  2006,  a decrease of 21% from the $22.9
million  recorded in 2005.  This  decrease was due to a $6.8 million  decline in
domestic  product sales  primarily due to lower  hardware  sales to  Hospitality
customers.  This drop in domestic  revenue was partially  offset by a $2 million
increase in international  product sales. This increase was the result of growth
in sales to the Company's restaurant customers in Asia and Europe.

     Customer service  revenues are also generated by the Company's  Hospitality
segment.   The  Company's   service   offerings   include  system   integration,
installation, training, twenty-four hour help desk support and various depot and
on-site service  options.  Customer  service revenues were $15.1 million for the
quarter  ended  September 30, 2006,  virtually  unchanged for the same period in
2005.  The Company  experienced  modest  growth in its depot,  field service and
support  center  revenues for its  restaurant  customers due to expansion of the
Company's  customer base. This was offset by a decline in  installation  revenue
due to the timing of customer installations.

     Contract revenues from the Company's  Government segment were $15.5 million
for the quarter ended September 30, 2006, an increase of 8% when compared to the
$14.3  million  recorded  in  the  same  period  in  2005.  The  primary  factor
contributing  to the  growth  was a  $722,000  increase  in  applied  technology
contracts  including the Company's work in providing technical expertise for the
development  of  battle  planning   software  used  by  the  Air  Force.   Also,
contributing  to  the  increase  was  revenue  from  the  Company's  information
technology  outsourcing  contracts  for  facility  operations  at critical  U.S.
Department  of  Defense   telecommunication   sites  across  the  globe.   These
outsourcing  operations  provided by the Company directly support U.S. Navy, Air
Force and Army  operations  as they seek to convert their  military  information
technology  communications facilities into contractor-run operations and to meet
new requirements with contractor support.

     Product  margins for the quarter ended  September  30, 2006 were 42.3%,  an
increase of 20 basis points from the 42.1% for the quarter  ended  September 30,
2005. This increase in margins was primarily  attributable to improved  hardware
margins on the Company's restaurant products.
<PAGE>


     Customer  Service  margins were 24.5% for the quarter  ended  September 30,
2006  compared  to 23.6% for the same  period in 2005.  This  increase is due to
lower material costs and continuous  improvement in operational  efficiencies in
several service areas.

     Contract  margins were 5.6% for the quarter ended September 30, 2006 versus
7% for the same period in 2005. The decrease is due to contract mix and a slight
decline in performance on certain fixed price  contracts.  The most  significant
components  of contract  costs in 2006 and 2005 were labor and fringe  benefits.
For the quarter ended  September 30, 2006,  labor and fringe benefits were $11.4
million or 78% of contract  costs  compared  to $9.6  million or 73% of contract
costs for the same period in 2005.

     Selling,  general and administrative  expenses are virtually all related to
the Company's Hospitality segment.  Selling, general and administrative expenses
for the quarter ended  September 30, 2006 were $8.2 million,  an increase of 11%
from the $7.5  million  expense for the same period in 2005.  This  increase was
primarily  due to start up  costs  incurred  in  anticipation  of a new  service
contract  with a  restaurant  customer,  which  began on October  1, 2006.  This
increase is also due to a rise in sales and marketing  expenses  associated with
restaurant  products as the Company is planning for future  growth  including in
international   markets.   The   Company's   2005   acquisition   of  PixelPoint
Technologies, Inc. also contributed to this increase.

     Research  and  development  expenses  relate  primarily  to  the  Company's
Hospitality segment. Research and development expenses were $2.6 million for the
quarter  ended  September  30,  2006,  an increase  of 5% from the $2.5  million
recorded in 2005.  The  increase was  primarily  attributable  to the  Company's
continued research and development in its hardware and software products for its
restaurant,  resort and spa  customers.  The increase also reflects the research
and development of its recently acquired PixelPoint subsidiary.

     Amortization of identifiable  intangible  assets was $307,000 for the third
quarter of 2006 compared to $246,000 for 2005.  The increase is primarily due to
amortization  relating to the  acquisition of PixelPoint  Technologies,  Inc. on
October 4, 2005.

     Other  income,  net, was $62,000 for the quarter  ended  September 30, 2006
compared  to  $191,000  for the same  period  in 2005.  Other  income  primarily
includes  rental income and foreign  currency gains and losses.  The decrease is
primarily due to additional foreign currency losses in 2006 compared to currency
gains in 2005.
<PAGE>

     Interest expense  represents  interest charged on the Company's  short-term
borrowing  requirements from banks and from long-term debt. Interest expense was
$206,000  for the  quarter  ended  September  30, 2006 as compared to $41,000 in
2005.  The  Company  experienced  a higher  borrowing  interest  rate and higher
average borrowings in 2006 when compared to 2005.

     For the quarter ended  September 30, 2006, the Company's  effective  income
tax rate was 36.9%,  compared to 38.3% in 2005.  The  variance  from the federal
statutory rate in 2006 and 2005 was primarily due to state income taxes,  offset
by benefits  related to export sales as well as tax benefits related to domestic
production activities.

Results of Operations  -- Nine Months Ended  September 30, 2006 Compared to Nine
Months Ended September 30, 2005

     The Company  reported  revenues of $154.5 million for the nine months ended
September 30, 2006, an increase of 1.5% from the $152.2 million reported for the
nine months ended  September  30, 2005.  The  Company's  net income for the nine
months ended September 30, 2006 was $4.9 million, or $.33 diluted net income per
share, compared to net income of $6.2 million and $.42 per diluted share for the
same period in 2005.

     Product revenues from the Company's  Hospitality segment were $63.7 million
for the nine months  ended  September  30, 2006, a decrease of 5% from the $66.8
million  recorded  in  2005.  In the  domestic  restaurant  market  the  Company
experienced  an increase in the sales of its  software  products  which was more
than offset by a decline in hardware sales  resulting in $7.4 million decline in
product revenue.  Internationally,  product revenues grew $4.3 million primarily
due to hardware and software sales to restaurant customers in Asia and Europe.

     Customer service  revenues are also generated by the Company's  Hospitality
segment.   The  Company's   service   offerings   include  system   integration,
installation, training, twenty-four hour help desk support and various depot and
on-site service  options.  Customer  service revenues were $43.7 million for the
nine months ended  September  30, 2006, an increase of 2% from the $42.9 million
for the same  period  in 2005.  The  increase  was due to a 10% or $2.2  million
growth in the  Company's  field  service  and  support  center  revenue  for its
restaurant   customers  due  to  expansion  of  the  Company's   customer  base.
Additionally,  systems  integration and software  maintenance  revenues from the
Company's resort and spa customers  contributed to its revenue growth.  This was
partially  offset by a decline  in  installation  revenue  due to the  timing of
customer installations.
<PAGE>

     Contract  revenues from the Company's  Government  segment were $47 million
for the nine months ended  September  30, 2006, an increase of 11% when compared
to the $42.5  million  recorded  in the same  period in 2005.  This  growth  was
primarily  due  to a $2.7  million  increase  in  applied  technology  contracts
including  technical  expertise for the development of battle planning  software
used by the Air Force.  Also  contributing  to this  growth  was a $1.8  million
increase in  information  technology  outsourcing  revenue  from  contracts  for
facility  operations  at critical U.S.  Department of Defense  telecommunication
sites across the globe.  These  outsourcing  operations  provided by the Company
directly  support  U.S.  Navy,  Air  Force and Army  operations  as they seek to
convert their military  information  technology  communications  facilities into
contractor-run operations and to meet new requirements with contractor support.

     Product margins for the nine months ended September 30, 2006 were 43.1%, an
increase of 300 basis points from the 40.1% for the nine months ended  September
30, 2005. This increase in margins was primarily attributable to higher software
revenue.  This software revenue was generated from the Company's resort, spa and
restaurant  customers  including  license sales of the Company's  newly acquired
PixelPoint software.

     Customer Service margins were 24.7% for the nine months ended September 30,
2006  compared to 23.3% for the same  period in 2005.  The  increase  was due to
continuous  improvements in operational  effectiveness  in certain service areas
offset by a decline in installation  margins for restaurant customers due to the
drop in installation revenue for the period.

     Contract  margins  were 6.8% for the nine months ended  September  30, 2006
versus 6.4% for the same period in 2005.  The margin  increase  resulted  from a
favorable cost share adjustment on our Logistics  Management  program and higher
margins on certain fixed price  contracts.  The most  significant  components of
contract  costs in 2006 and 2005 were  labor and fringe  benefits.  For the nine
months ended September 30, 2006, labor and fringe benefits were $34.2 million or
78.1% of contract costs compared to $29 million or 73% of contract costs for the
same period in 2005.

     Selling,  general and administrative  expenses are virtually all related to
the Company's Hospitality segment.  Selling, general and administrative expenses
for the nine months ended September 30, 2006 were $24.5 million,  an increase of
11% from the $22.2 million expense for the same period in 2005. The increase was
primarily  attributable to a rise in selling and marketing  expenses  related to
sales  of  the  Company's  traditional  hardware  and  software  products.  Also
contributing  to the increase was the Company's  2005  acquisition of PixelPoint
Technologies,  Inc. and start up costs relating to a new service contract with a
restaurant customer.
<PAGE>

     Research  and  development  expenses  relate  primarily  to  the  Company's
Hospitality segment. Research and development expenses were $8.4 million for the
nine months ended  September  30, 2006, an increase of 22% from the $6.9 million
recorded in 2005.  The  increase was  primarily  attributable  to the  Company's
continuing  research  and  development  related  to its  hardware  and  software
products for its restaurant,  resort and spa customers also  contributing to the
increase was the Company's acquisition of PixelPoint in 2005.

     Amortization  of identifiable  intangible  assets was $922,000 for the nine
months ended  September 30, 2006 compared to $736,000 for 2005.  The increase is
primarily  due  to  amortization  relating  to  the  acquisition  of  PixelPoint
Technologies, Inc. on October 4, 2005.

     Other  income,  net, was $437,000 for the nine months ended  September  30,
2006  compared to $495,000 for the same period in 2005.  Other income  primarily
includes  rental income and foreign  currency gains and losses.  The decrease in
2006 resulted  primarily from a decline in currency gains partially offset by an
increase in rental income.

     Interest expense  represents  interest charged on the Company's  short-term
borrowing  requirements from banks and from long-term debt. Interest expense was
$458,000 for the nine months ended September 30, 2006 as compared to $184,000 in
2005.  The  Company  experienced  a higher  borrowing  interest  rate and higher
average borrowings outstanding in 2006 which compared to 2005.

     For the nine months ended  September  30,  2006,  the  Company's  effective
income tax rate was 35.9%,  compared  to 38.1% in 2005.  The  variance  from the
federal statutory rate in 2006 and 2005 was primarily due to state income taxes,
offset by benefits  related to export sales as well as tax  benefits  related to
domestic production activities.


Liquidity and Capital Resources

     The  Company's  primary  sources  of  liquidity  have  been  cash flow from
operations and lines of credit with various  banks.  Cash used in operations was
$8.3  million  for the nine months  ended  September  30, 2006  compared to cash
provided by operations of $7.4 million for 2005.  In 2006,  cash was  negatively
impacted  by the timing of  customer  receipts  and by  inventory  purchases  in
anticipation of future demand.  In 2005, cash flow was generated  primarily from
operating profits and the timing of vendor payments for material purchases. This
was  partially  offset by an  increase  in  accounts  receivable  and  inventory
purchases.
<PAGE>

     Cash used in  investing  activities  was $1.4  million  for the nine months
ended September 30, 2006 compared to $2 million from the same period in 2005. In
2006, capital  expenditures were $962,000 and were principally for manufacturing
equipment and  information  technology  equipment and software for internal use.
Capitalized  software  costs  relating to software  development  of  Hospitality
segment products were $399,000 in 2006. In 2005, capital  expenditures were $1.4
million and were  primarily  for  manufacturing  and  research  and  development
equipment.  Capitalized  software  costs  relating  to software  development  of
Hospitality segment products were $528,000 in 2005.

     Cash provided by financing  activities was $6.7 million for the nine months
ended  September  30,  2006  versus cash used by  financing  activities  of $8.8
million  in 2005.  During  2006,  the  Company  increased  its  short-term  bank
borrowings  by $6.4 million and received  $160,000 from the exercise of employee
stock options.  In 2005, the Company  reduced its short-term  bank borrowings by
$10.2  million and received  $1.5  million  from the exercise of employee  stock
options.

     The Company has an aggregate  availability of $20,000,000 in unsecured bank
lines of credit which expire in April, 2009. One line totaling $12,500,000 bears
interest at the bank  borrowing  rate (6.3% at September 30,  2006).  The second
line of  $7,500,000  allows the Company,  at its option,  to borrow funds at the
LIBOR rate plus the  applicable  interest  rate  spread or at the  bank's  prime
lending rate (6.3% at September 30, 2006).

     At September 30, 2006, there was $9,899,000  outstanding  under these lines
and $10,101,000  available under these lines.  These facilities  contain certain
loan  covenants  including a leverage ratio of greater than 3.5 to 1 and a fixed
charge coverage ratio of not greater than 4 to 1.

     During  fiscal  year  2006,  the  Company   anticipates  that  its  capital
requirements  will be  approximately  $2 million.  The Company  does not usually
enter into long term contracts with its major Hospitality segment customers. The
Company  commits  to  purchasing   inventory  from  its  suppliers  based  on  a
combination  of internal  forecasts and the actual orders from  customers.  This
process, along with good relations with suppliers, minimizes the working capital
investment  required  by the  Company.  Although  the  Company  lists  two major
customers,  McDonald's  and Yum!  Brands,  it sells to  hundreds  of  individual
franchisees of these corporations, each of which is individually responsible for
its own debts. These broadly made sales  substantially  reduce the impact on the
Company's  liquidity  if one  individual  franchisee  reduces  the volume of its
purchases  from the  Company in a given  year.  The  Company,  based on internal
forecasts, believes its existing cash, lines of credit facilities and its

<PAGE>

anticipated operating cash flow will be sufficient to meet its cash requirements
through at least the next twelve months.  However,  the Company may be required,
or could elect,  to seek  additional  funding prior to that time.  The Company's
future capital  requirements  will depend on many factors  including its rate of
revenue growth, the timing and extent of spending to support product development
efforts,  expansion of sales and marketing,  the timing of  introductions of new
products and  enhancements to existing  products,  and market  acceptance of its
products.  The Company  cannot assure that  additional  equity or debt financing
will be  available  on  acceptable  terms or at all.  The  Company's  sources of
liquidity  beyond  twelve  months,  in  management's  opinion,  will be its cash
balances on hand at that time,  funds  provided by operations,  funds  available
through  its lines of credit and the  long-term  credit  facilities  that it can
arrange.

Critical Accounting Policies

     The  Company's   consolidated   financial   statements  are  based  on  the
application  of U.S.  generally  accepted  accounting  principles  (GAAP).  GAAP
requires  the  use  of  estimates,   assumptions,   judgments   and   subjective
interpretations  of  accounting  principles  that have an impact on the  assets,
liabilities,  revenue and expense amounts reported. The Company believes its use
of  estimates  and  underlying  accounting  assumptions  adhere  to GAAP and are
consistently   applied.   Valuations   based  on  estimates   are  reviewed  for
reasonableness  and  adequacy on a  consistent  basis  throughout  the  Company.
Primary areas where  financial  information of the Company is subject to the use
of  estimates,  assumptions  and the  application  of judgment  include  revenue
recognition, accounts receivable, inventories, intangible assets and taxes.

Revenue Recognition Policy

     The Company recognizes  revenue generated by the Hospitality  segment using
the  guidance  from SEC  Staff  Accounting  Bulletin  (SAB)  No.  104,  "Revenue
Recognition" and the AICPA Statement of Position (SOP) 97-2,  "Software  Revenue
Recognition".  Product  revenues  consist  of  sales of the  Company's  standard
point-of-sale  and  property  management  systems  of the  Hospitality  segment.
Product   revenues  include  both  hardware  and  software  sales.  The  Company
recognizes revenue from the sale of complete restaurant systems (which primarily
includes  hardware or hardware and software) upon delivery to the customer site,
or upon installation for certain software products.  For restaurant systems that
are self-installed by the customer or an unrelated third party and for component
sales or supplies,  the Company recognizes revenue at the time of shipment.  The
Company also records service revenues relating to its standard point-of-sale and
property management systems of the Hospitality segment. Service revenues include
installation  and training,  support  maintenance for both hardware and software
products, and field and depot repair. For elements of service revenues,  such as

<PAGE>

installation and training, revenue is based upon standard hourly/daily rates and
revenue is recognized as the services are  performed.  For hardware and software
support  maintenance,  revenue is based on established  renewal  rates.  Service
revenues  from  maintenance  contracts are  recognized  ratably over the related
contract period. For depot repair,  revenue is charged based on established flat
rates for the items being repaired.

     The  individual   product  and  service  offerings  that  are  included  in
arrangements  with our customers  are  identified  and priced  separately to the
customer based upon the stand alone price for each individual product or service
sold in the arrangement irrespective of the combination of products and services
which are included in a particular arrangement. As such, the units of accounting
are based on each individual  product and service sold, and revenue is allocated
to each  element  based on vendor  specific  objective  evidence  (VSOE) of fair
value.  VSOE of fair value for each  individual  product and service is based on
separate individual prices of these products and services.  The sales price used
to  establish  fair  value is the  sales  price of the  element  when it is sold
individually  in a  separate  arrangement  and not as a  separate  element  in a
multiple element arrangement.

     The Company recognizes revenue in its Government segment using the guidance
from SEC Staff Accounting Bulletin No. 104, Revenue  Recognition.  The Company's
contract  revenues  generated by the Government  segment  result  primarily from
contract services performed for the U.S. Government under a variety of cost-plus
fixed fee,  time-and-material  and fixed-price  contracts.  Revenue on cost-plus
fixed fee  contracts  is  recognized  based on  allowable  costs for labor hours
delivered,  as well as other allowable costs plus the applicable fee. Revenue on
time and material  contracts is recognized by  multiplying  the number of direct
labor hours delivered in the performance of the contract by the contract billing
rates and  adding  other  direct  costs as  incurred.  Revenue  for  fixed-price
contracts is  recognized  as labor hours are delivered  which  approximates  the
straight-line basis of the life of the contract.  The Company's obligation under
these  contracts  is to  provide  labor  hours to conduct  research  or to staff
facilities with no other  deliverables or performance  obligations.  Anticipated
losses on all contracts are recorded in full when identified.  Unbilled accounts
receivable  are stated in the  Company's  consolidated  financial  statements at
their estimated realizable value.  Contract costs,  including indirect expenses,
are subject to audit and adjustment through negotiations between the Company and
U.S. Government representatives.

Accounts Receivable

     Allowances for doubtful  accounts are based on estimates of probable losses
related  to  accounts  receivable  balances.  The  establishment  of  allowances
requires  the use of  judgment  and  assumptions  regarding  probable  losses on
receivable  balances.  We continuously monitor collections and payments from our
customers  and maintain a provision  for  estimated  credit  losses based on our
historical  experience and any specific customer  collection issues that we have

<PAGE>

identified.   While  such  credit  losses  have  historically  been  within  our
expectations and appropriate reserves have been established, we cannot guarantee
that we will  continue  to  experience  the same  credit loss rates that we have
experienced in the past. Thus, if the financial  condition of our customers were
to  deteriorate,  our actual  losses may exceed our  estimates,  and  additional
allowances would be required.

Inventories

     The Company's  inventories are valued at the lower of cost or market,  with
cost determined using the first-in,  first-out  (FIFO) method.  The Company uses
certain  estimates and judgments and considers several factors including product
demand and changes in technology to provide for excess and obsolescence reserves
to properly value inventory.

Capitalized Software Development Costs

     The  Company  capitalizes  certain  costs  related  to the  development  of
computer  software used in its  Hospitality  segment under the  requirements  of
Statement of Financial  Accounting Standards No. 86, Accounting for the Costs of
Computer  Software  to  be  Sold,  Leased,  or  Otherwise   Marketed.   Software
development costs incurred prior to establishing  technological  feasibility are
charged to operations and included in research and development  costs.  Software
development  costs incurred after  establishing  technological  feasibility  are
capitalized  and amortized over the estimated  economic life when the product is
available for general release to customers.

Goodwill

     Following  Financial  Accounting  Standards  Board issuance of Statement of
Financial  Accounting  Standards No. 142, Goodwill and Other Intangible  Assets,
(SFAS 142),  the Company  tests all goodwill for  impairment  annually,  or more
frequently  if  circumstances  indicate  potential  impairment.  The Company has
elected to  annually  test for  impairment  in the fourth  quarter of its fiscal
year.

Taxes

     The  Company  has  significant  amounts of  deferred  tax  assets  that are
reviewed for recoverability and valued  accordingly.  These assets are evaluated
by using  estimates  of future  taxable  income and the  impact of tax  planning
strategies.  Valuations  related to tax  accruals  and assets can be impacted by
changes to tax codes, changes in statutory tax rates and the Company's estimates
of its future taxable income levels.
<PAGE>

Recent Accounting Pronouncements

     FASB  Interpretation 48 was issued in July 2006 to clarify the criteria for
recognizing  tax benefits  under FASB  Statement No. 109,  Accounting for Income
Taxes. The Interpretation  defines the threshold for recognizing the benefits of
tax-return positions in the financial statements as "more-likely-than-not" to be
sustained  by the taxing  authority  and will  affect many  companies'  reported
results and their  disclosures  of uncertain tax positions.  The  Interpretation
does  not  prescribe  the type of  evidence  required  to  support  meeting  the
more-likely-than-not  threshold, stating that it depends on the individual facts
and  circumstances.  The  benefit  recognized  for a tax  position  meeting  the
more-likely-than-not  criterion is measured based on the largest benefit that is
more than 50 percent  likely to be  realized.  The  measurement  of the  related
benefit is determined by considering the probabilities of the amounts that could
be realized upon  ultimate  settlement,  assuming the taxing  authority has full
knowledge of all relevant facts and including  expected  negotiated  settlements
with the taxing authority. Interpretation 48 is effective as of the beginning of
the first fiscal year  beginning  after  December 15, 2006 (the  Company's  2007
fiscal year). The Company is currently  analyzing the financial statement impact
of adopting this pronouncement.

     In  September  2006,  SEC Staff  Accounting  Bulletin No. 108 was issued to
provide  guidance  on  Quantifying  Financial  Statement  Misstatements.   Staff
Accounting Bulletin No. 108 addresses how the effects of prior-year  uncorrected
misstatements   should  be  considered   when   quantifying   misstatements   in
current-year  financial  statements.  The SAB requires  registrants  to quantify
misstatements using both the balance sheet and  income-statement  approaches and
to evaluate  whether  either  approach  results in  quantifying an error that is
material in light of relevant quantitative and qualitative factors. The SAB does
not change the staff's previous guidance in SAB 99 on evaluating the materiality
of misstatements.

     When the effect of initial  adoption is determined to be material,  the SAB
allows  registrants to record that effect as a  cumulative-effect  adjustment to
beginning-of-year  retained earnings.  The requirements are effective for annual
financial  statements  covering the first fiscal year ending after  November 15,
2006 (the Company's 2006 fiscal year).

Item 3. Quantitative and Qualitative Disclosures about Market Risk

INFLATION

     Inflation  had little effect on revenues and related costs during the first
nine months of 2006.  Management  anticipates that margins will be maintained at
acceptable levels to minimize the affects of inflation, if any.

<PAGE>
INTEREST RATES

     As of September 30, 2006, the Company has $2 million in variable  long-term
debt and $9.9 million in variable  short-term debt. The Company believes that an
adverse  change in interest  rates of 100 basis points would not have a material
impact on our  business,  financial  condition,  results of  operations  or cash
flows.

FOREIGN CURRENCY

     The Company's  primary exposures relate to certain  non-dollar  denominated
sales and operating  expenses in Europe and Asia.  These primary  currencies are
the Euro, the Australian  dollar and the Singapore dollar.  Management  believes
that foreign currency  fluctuations  should not have a significant impact on our
business,  financial conditions,  results of operations or cash flows due to the
low volume of business affected by foreign currencies.

Item 4. Controls and Procedures

     (a)  Evaluation of Disclosure Controls and Procedures.

     As of the  end of the  period  covered  by  this  report,  our  management,
including our Chief Executive Officer and Chief Financial  Officer,  carried out
an evaluation of the  effectiveness  of the Company's " disclosure  controls and
procedures"  (as defined in the Securities  Exchange Act of 1934 Rules 13a-15(e)
and 15d-15(e)) of the Company. These officers have concluded that our disclosure
controls and  procedures  are  effective.  As such, we believe that all material
information  relating  to us and our  consolidated  subsidiaries  required to be
disclosed in our periodic  filings with the Securities  and Exchange  Commission
(i) is recorded,  processed,  summarized  and reported  within the required time
period,  and (ii) is accumulated and  communicated to the Company's  management,
including  our  Chief  Executive  Officer  and  Chief  Financial   Officer,   as
appropriate, to allow timely decisions regarding required disclosure.

     (b)  Changes in Internal Controls.

     There was no change  in the  Company's  internal  controls  over  financial
reporting,  as defined in Rule  13a-15(f) of the Exchange Act during the quarter
ended September 30, 2006 that has materially  affected,  or is reasonably likely
to materially affect, such internal controls over financial reporting.
<PAGE>

                           PART II - OTHER INFORMATION

Item 1A. Risk Factors

     We operate in a dynamic  and rapidly  changing  environment  that  involves
numerous risks and uncertainties.  The following section describes some, but not
all, of the risks and uncertainties that could have a material adverse effect on
our business, financial condition, results of operations and the market price of
our common stock,  and could cause our actual results to differ  materially from
those expressed or implied in our forward-looking statements.

A DECLINE  IN THE VOLUME OF  PURCHASES  MADE BY ANY ONE OF THE  COMPANY'S  MAJOR
CUSTOMERS WOULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS.

     A small  number of related  customers  have  historically  accounted  for a
majority of the  Company's  net  revenues in any given  fiscal  period.  For the
fiscal years ended December 31, 2005, 2004 and 2003,  aggregate sales to our top
two Hospitality segment customers,  McDonald's and Yum! Brands, amounted to 41%,
51% and  50%,  respectively,  of  total  revenues.  For the  nine  months  ended
September  30,  2006  and  2005,  sales  to  those  customers  were 38% and 40%,
respectively  of  total  revenues.  Most  of the  Company's  customers  are  not
obligated  to  provide us with any  minimum  level of future  purchases  or with
binding forecasts of product purchases for any future period. In addition, major
customers  may  elect to delay or  otherwise  change  the  timing of orders in a
manner that could adversely affect the Company's quarterly and annual results of
operations.  There can be no assurance that our current  customers will continue
to place  orders  with us,  or that we will be able to  obtain  orders  from new
customers.

AN  INABILITY  TO  PRODUCE  NEW  PRODUCTS  THAT  KEEP  PACE  WITH  TECHNOLOGICAL
DEVELOPMENTS  AND CHANGING  MARKET  CONDITIONS  COULD RESULT IN A LOSS OF MARKET
SHARE.

     The  products  we sell  are  subject  to rapid  and  continual  changes  in
technology. Our competitors offer products that have an increasingly wider range
of features and capabilities. We believe that in order to compete effectively we
must provide systems incorporating new technologies at competitive prices. There
can be no  assurance  that we will be able  to  continue  funding  research  and
development at levels  sufficient to enhance our current product  offerings,  or
that the Company  will be able to develop and  introduce  on a timely  basis new
products that keep pace with  technological  developments and emerging  industry
standards  and address the  evolving  needs of  customers.  There also can be no
assurance that we will not experience  difficulties that will result in delaying
or preventing  the  successful  development,  introduction  and marketing of new

<PAGE>

products  in our  existing  markets,  or  that  our  new  products  and  product
enhancements will adequately meet the requirements of the marketplace or achieve
any significant degree of market acceptance. Likewise, there can be no assurance
as to the  acceptance  of our  products  in new  markets,  nor can  there be any
assurance  as to the success of our  penetration  of these  markets,  nor to the
revenue  or  profit  margins  realized  by the  Company  with  respect  to these
products. If any of our competitors were to introduce superior software products
at competitive  prices,  or if our software  products no longer met the needs of
the  marketplace  due  to  technological   developments  and  emerging  industry
standards,  our software  products may no longer retain any  significant  market
share.  If this were to occur,  we could be required to record a charge  against
capitalized  software  costs,  which amount to $3.1 million as of September  30,
2006.

WE GENERATE MUCH OF OUR REVENUE FROM THE HOSPITALITY  INDUSTRY AND THEREFORE ARE
SUBJECT TO DECREASED REVENUES IN THE EVENT OF A DOWNTURN EITHER IN THAT INDUSTRY
OR IN THE ECONOMY AS A WHOLE.

     For the fiscal years ended  December 31,  2005,  2004 and 2003,  we derived
73%,  71% and 70%,  respectively,  of our total  revenues  from the  Hospitality
industry,  primarily  the quick  service  restaurant  marketplace.  For the nine
months ended September 30, 2006 and 2005, revenues from the Hospitality industry
were 70% and 72%, respectively, of total revenues. Consequently, our Hospitality
technology  product  sales  are  dependent  in large  part on the  health of the
Hospitality   industry,   which  in  turn  is  dependent  on  the  domestic  and
international  economy,  as well as factors such as consumer buying  preferences
and weather  conditions.  Instabilities  or downturns in the Hospitality  market
could  disproportionately  impact our  revenues,  as clients may either exit the
industry  or delay,  cancel or reduce  planned  expenditures  for our  products.
Although  we believe we can assist the quick  service  restaurant  sector of the
Hospitality industry in a competitive environment,  given the cyclical nature of
that industry,  there can be no assurance that our profitability and growth will
continue.

WE DERIVE A PORTION OF OUR REVENUE  FROM  GOVERNMENT  CONTRACTS,  WHICH  CONTAIN
PROVISIONS UNIQUE TO PUBLIC SECTOR CUSTOMERS,  INCLUDING THE GOVERNMENT'S  RIGHT
TO MODIFY OR TERMINATE THESE CONTRACTS AT ANY TIME.

     For the fiscal years ended  December 31,  2005,  2004 and 2003,  we derived
27%, 29% and 30%, respectively,  of our total revenues from contracts to provide
technical services to U.S. Government agencies and defense contractors.  For the
nine months ended September 30, 2006 and 2005, revenues from such contracts were
30% and 28%,  respectively,  of total revenues.  Contracts with U.S.  Government
agencies typically provide that such contracts are terminable at the convenience
of the U.S.  Government.  If the U.S.  Government  terminated a contract on this

<PAGE>

basis,  we would be entitled to receive  payment for our allowable costs and, in
general, a proportionate share of our fee or profit for work actually performed.
Most U.S.  Government  contracts are also subject to modification or termination
in the event of changes in funding. As such, we may perform work prior to formal
authorization,  or the  contract  prices may be adjusted for changes in scope of
work. Termination or modification of a substantial number of our U.S. Government
contracts  could  have a  material  adverse  effect on our  business,  financial
condition and results of operations.

     We perform  work for  various  U.S.  Government  agencies  and  departments
pursuant  to  fixed-price,  cost-plus  fixed  fee and  time-and-material,  prime
contracts  and  subcontracts.  Approximately  64% of the revenue that we derived
from  Government  contracts  for the year  ended  December  31,  2005  came from
fixed-price or time-and-material  contracts.  The balance of the revenue that we
derived from  Government  contracts in 2005 primarily came from cost-plus  fixed
fee contracts. Most of our contracts are for one-year to five-year terms.

     While  fixed-price  contracts  allow us to benefit from cost savings,  they
also expose us to the risk of cost overruns. If the initial estimates we use for
calculating  the  contract  price are  incorrect,  we can incur  losses on those
contracts.  In addition,  some of our  governmental  contracts  have  provisions
relating  to cost  controls  and audit  rights and, if we fail to meet the terms
specified in those contracts, then we may not realize their full benefits. Lower
earnings  caused by cost overruns  would have an adverse effect on our financial
results.

     Under  time-and-materials  contracts,  we are paid for labor at  negotiated
hourly  billing  rates  and for  certain  expenses.  Under  cost-plus  fixed fee
contracts,  we are reimbursed for allowable costs and paid a fixed fee. However,
if our costs under either of these types of contract exceed the contract ceiling
or are  not  allowable  under  the  provisions  of the  contract  or  applicable
regulations, we may not be able to obtain reimbursement for all of our costs.

     If we are unable to control costs incurred in performing under each type of
contract,  such inability to control costs could have a material  adverse effect
on our financial  condition  and  operating  results.  Cost  over-runs  also may
adversely  affect our ability to sustain  existing  programs  and obtain  future
contract awards.

WE FACE EXTENSIVE COMPETITION IN THE MARKETS IN WHICH WE OPERATE, AND OUR
FAILURE TO COMPETE EFFECTIVELY COULD RESULT IN PRICE REDUCTIONS AND/OR DECREASED
DEMAND FOR OUR PRODUCTS AND SERVICES.

     There are  several  suppliers  who  offer  Hospitality  management  systems
similar to ours.  Some of these  competitors are larger than PAR and have access
to substantially greater financial and other resources and, consequently, may be
able to obtain more favorable terms than we can for components and subassemblies
incorporated  into  these  Hospitality  technology  products.  The rapid rate of

<PAGE>

technological  change in the  Hospitality  industry makes it likely that we will
face competition from new products designed by companies not currently competing
with us.  These new products may have  features not  currently  available on our
Hospitality  products.  We believe that our  competitive  ability depends on our
total  solution  offering,  our  product  development  and  systems  integration
capability, our direct sales force and our customer service organization.  There
is no assurance,  however,  that we will be able to compete  effectively  in the
hospitality technology market in the future.

     Our Government  contracting  business has been focused on niche  offerings,
primarily signal and image processing,  information  technology  outsourcing and
engineering  services.  Many of our  competitors  are, or are  subsidiaries  of,
companies such as Lockheed-Martin,  Raytheon, Northrop-Grumman,  BAE, Harris and
SAIC.  These  companies  are larger  and have  substantially  greater  financial
resources  than we do.  We also  compete  with  smaller  companies  that  target
particular  segments of the  Government  market.  These  companies may be better
positioned to obtain  contracts  through  competitive  proposals.  Consequently,
there are no assurances  that we will continue to win Government  contracts as a
prime contractor or subcontractor.

WE MAY  NOT BE  ABLE  TO  MEET  THE  UNIQUE  OPERATIONAL,  LEGAL  AND  FINANCIAL
CHALLENGES  THAT  RELATE TO OUR  INTERNATIONAL  OPERATIONS,  WHICH MAY LIMIT THE
GROWTH OF OUR BUSINESS.

     For the fiscal  years  ended  December  31,  2005,  2004 and 2003,  our net
revenues   from  sales   outside  the  United  States  were  11%,  9%  and  11%,
respectively,  of the  Company's  total  revenues.  For the  nine  months  ended
September  30, 2006 and 2005,  sales outside the United States were 13% and 10%,
respectively, of the total revenues. We anticipate that international sales will
continue to account for a significant portion of sales. We intend to continue to
expand  our  operations  outside  the  United  States  and to  enter  additional
international  markets,  which will require significant management attention and
financial resources.  Our operating results are subject to the risks inherent in
international  sales,  including,  but not limited to, regulatory  requirements,
political and economic changes and disruptions,  geopolitical  disputes and war,
transportation  delays,  difficulties  in staffing  and managing  foreign  sales
operations, and potentially adverse tax consequences. In addition,  fluctuations
in exchange  rates may render our products  less  competitive  relative to local
product  offerings,  or could result in foreign exchange losses,  depending upon
the currency in which we sell our products. There can be no assurance that these
factors  will not have a material  adverse  affect on our  future  international
sales and, consequently, on our operating results.
<PAGE>

OUR  BUSINESS  DEPENDS  ON A  LARGE  NUMBER  OF  HIGHLY  QUALIFIED  PROFESSIONAL
EMPLOYEES  AND, IF WE ARE NOT ABLE TO RECRUIT AND RETAIN A SUFFICIENT  NUMBER OF
THESE  EMPLOYEES,  WE WOULD NOT BE ABLE TO PROVIDE HIGH QUALITY  SERVICES TO OUR
CURRENT AND FUTURE CUSTOMERS, WHICH WOULD HAVE AN ADVERSE EFFECT ON OUR REVENUES
AND OPERATING RESULTS.

     We actively compete for qualified  professional  staff. The availability or
lack thereof of qualified  professional  staff may affect our ability to develop
new products and to provide  services and meet the needs of our customers in the
future. An inability to fulfill customer requirements due to a lack of available
qualified  staff at agreed upon salary rates may adversely  impact our operating
results in the future.

A SIGNIFICANT  PORTION OF OUR TOTAL ASSETS CONSISTS OF GOODWILL AND IDENTIFIABLE
INTANGIBLE  ASSETS,  WHICH ARE SUBJECT TO A PERIODIC  IMPAIRMENT  ANALYSIS AND A
SIGNIFICANT IMPAIRMENT  DETERMINATION IN ANY FUTURE PERIOD COULD HAVE AN ADVERSE
EFFECT ON OUR RESULTS OF OPERATIONS  EVEN WITHOUT A SIGNIFICANT  LOSS OF REVENUE
OR INCREASE IN CASH EXPENSES ATTRIBUTABLE TO SUCH PERIOD.

     We have goodwill and identifiable  intangible assets totaling approximately
$20.9  million and $8.9 million at September 30, 2006,  respectively,  resulting
primarily from several  business  acquisitions.  At least annually,  we evaluate
goodwill and  identifiable  intangible  assets for impairment  based on the fair
value  of the  operating  business  unit to  which  these  assets  relate.  This
estimated fair value could change if we are unable to achieve  operating results
at the levels that have been forecasted,  the market valuation of such companies
decreases  based on  transactions  involving  similar  companies,  or there is a
permanent,  negative change in the market demand for the services offered by the
business  unit.  These  changes  could result in an  impairment  of the existing
goodwill  and  identifiable  intangible  asset  balances  that  could  require a
material non-cash charge to our results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

     None.

<PAGE>


Item 6. Exhibits and Reports on Form 8-K




                                List of Exhibits




      Exhibit No.                   Description of Instrument
      -----------                   -------------------------

         31.1               Certification of Chairman of the Board
                            and Chief Executive Officer Pursuant
                            to Section 302 of the Sarbanes-Oxley Act
                            of 2002.

         31.2               Certification of Vice President, Chief
                            Financial Officer and Treasurer Pursuant
                            to Section 302 of the Sarbanes-Oxley Act
                            of 2002.

         32.1               Certification of Chairman of the Board
                            and Chief Executive Officer and
                            Vice President, Chief Financial Officer
                            and Treasurer Pursuant to 18 U.S.C.
                            Section 1350, as Adopted Pursuant to
                            Section 906 of the Sarbanes-Oxley Act of 2002.



Reports on Form 8-K

     On July 26, 2006, PAR Technology Corporation furnished a report on Form 8-K
pursuant to Item 2.02  (Results of Operations  and Financial  Condition) of that
Form relating to its financial  information for the quarter ended June 30, 2006,
as presented  in a press  release of July 27, 2006 and  furnished  thereto as an
exhibit.



<PAGE>

                                   SIGNATURES




Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.











                                        PAR TECHNOLOGY CORPORATION
                                        --------------------------
                                               (Registrant)









Date:  November 9, 2006



                                        /s/RONALD J. CASCIANO
                                        ------------------------------
                                        Ronald J. Casciano
                                        Vice President, Chief Financial Officer
                                        and Treasurer





<PAGE>




                                  Exhibit Index




                                                             Sequential
                                                                Page
     Exhibit                                                   Number
     -------                                                 ----------


      31.1      Certification of Chairman of the Board           E-1
                and Chief Executive Officer Pursuant
                to Section 302 of the Sarbanes-Oxley Act
                of 2002.

      31.2      Certification of Vice President, Chief           E-2
                Financial Officer and Treasurer Pursuant
                to Section 302 of the Sarbanes-Oxley Act
                of 2002.

      32.1      Certification of Chairman of the Board           E-3
                and Chief Executive Officer and
                Vice President, Chief Financial Officer
                and Treasurer Pursuant to 18 U.S.C.
                Section 1350, as Adopted Pursuant to
                Section 906 of the Sarbanes-Oxley Act
                of 2002.



<PAGE>

                                  Exhibit 31.1

                           PAR TECHNOLOGY CORPORATION
                         STATEMENT OF EXECUTIVE OFFICER

I, John W. Sammon, Jr., certify that:

1.   I have reviewed this report on Form 10-Q of PAR Technology Corporation;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules  13a-15(e) and 15d-15(e))  and internal  control over
     financial  reporting  (as  defined  in  Exchange  Act Rules  13a-15(f)  and
     15d-15(f)), for the registrant and have:

     a.   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     b.   Designed such internal  control over  financial  reporting,  or caused
          such internal  control over  financial  reporting to be designed under
          our  supervision,   to  provide  reasonable  assurance  regarding  the
          reliability  of financial  reporting and the  preparation of financial
          statements for external purposes in accordance with generally accepted
          accounting principles;

     c.   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluations; and

     d.   Disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal  quarter and that has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting.

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors:

     a.   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     b.   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.


Date: November 9, 2006
                               /s/John W. Sammon, Jr.
                               ------------------------------------------
                               John W. Sammon, Jr.
                               Chairman of the Board and Chief Executive Officer


                                       E-1
<PAGE>

                                  Exhibit 31.2

                           PAR TECHNOLOGY CORPORATION
                         STATEMENT OF EXECUTIVE OFFICER

I, Ronald J. Casciano, certify that:

1.   I have reviewed this report on Form 10-Q of PAR Technology Corporation;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules  13a-15(e) and 15d-15(e))  and internal  control over
     financial  reporting  (as  defined  in  Exchange  Act Rules  13a-15(f)  and
     15d-15(f)), for the registrant and have:

     a.   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     b.   Designed such internal  control over  financial  reporting,  or caused
          such internal  control over  financial  reporting to be designed under
          our  supervision,   to  provide  reasonable  assurance  regarding  the
          reliability  of financial  reporting and the  preparation of financial
          statements for external purposes in accordance with generally accepted
          accounting principles;

     c.   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluations; and

     d.   Disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal  quarter and that has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting.

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors:

     a.   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     b.   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.


Date: November 9, 2006
                             /s/Ronald J. Casciano
                             ------------------------------------------
                             Ronald J. Casciano
                             Vice President, Chief Financial Officer & Treasurer


                                       E-2
<PAGE>

                                  Exhibit 32.1


                           PAR TECHNOLOGY CORPORATION
                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


     In connection with the Quarterly Report of PAR Technology  Corporation (the
"Company") on Form 10-Q for the quarter  ended  September 30, 2006 as filed with
the Securities and Exchange  Commission on the date hereof (the  "Report"),  we,
John W.  Sammon,  Jr.  and  Ronald J.  Casciano,  Chairman  of the Board & Chief
Executive Officer and Vice President, Chief Financial Officer & Treasurer of the
Company,  certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906
of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:


     (1)  The Report fully  complies  with the  requirement  of section 13(a) or
          15(d) of the Securities Exchange Act of 1934, as amended; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.






/s/John W. Sammon, Jr.
-------------------------------
John W. Sammon, Jr.
Chairman of the Board & Chief Executive Officer
November 9, 2006

/s/Ronald J. Casciano
-------------------------------
Ronald J. Casciano
Vice President, Chief Financial Officer & Treasurer
November 9, 2006


                                       E-3